Hello fellow students.........
I am writing this to convey my opinion on a formula i have encountered.In the chapter Working Capital Management of Financial Management subject of IPCC, the formula for Finished goods storage period goes this way 'Average stock of finished goods/Average cost of goods sold per day'. But as I think about it, it doesn't seem to be a correct one since the finished goods holding period has to be checked out with the production and not the sales. So, I suggest the formula to be 'Average stock of Finished Goods/Average cost of goods finished'.
If there is any argument that the formula suggested by me is wrong, I request such person to solve the following problem for me :
Cost of Goods Sold during the year amounts to Rs.40000, the cost of goods finished during the year is Rs.80000. The opening and closing stock of finished goods are 20000 and 60000 respectively.What would be the Finished Goods Holding period for that year.
I kindly request my friends to look upon it, and I am looking forward to get a consensus on this matter as soon as possible.Thank You.
CAclubindia
